How Republicans Imperil Their Own Tax Cuts

Their House and Senate budget resolutions are miles apart—which endangers reconciliation, which endangers tax cuts, which endangers what’s left of the GOP agenda.

(AP Photo/J. Scott Applewhite)

Senate Majority Leader Mitch McConnell, flanked by Senators John Thune and John Cornyn, announces to reporters that the Senate is moving ahead on a Republican budget plan at the Capitol on October 17, 2017.

Any hope of a GOP legislative victory in this session of Congress has come down to a vote on the 2018 budget resolution. And despite the conventional wisdom, there’s no definitive path yet for Republicans to actually get that done. The respective chambers have cobbled together wildly different versions of the budget, mirroring the broad ideological differences within the party. Leaders express confidence that some compromise will be reached. But hard-right members, emboldened by the implosion of the GOP establishment, haven’t exactly warmed to compromise during the first nine months of this year.

The budget resolution, mainly an aspirational framework for future funding appropriations that creates no new spending authority, is only important because of the unilateral strategy Republicans have been employing on big legislative priorities. Through the budget reconciliation process, Republicans can advance a bill while avoiding the Senate filibuster, and so need to win only 50 votes plus a Mike Pence tie-breaker. The only way to create a reconciliation bill, however, is by authorizing it and setting its parameters in the budget resolution.

That means that the Trump tax overhaul, which Democrats have strongly rejected as a giveaway to the rich, cannot pass without first passing a budget resolution. Republicans also cannot take another stab at repealing the Affordable Care Act without a budget resolution. All of the GOP’s plans for total domination of Washington, which have been mostly stuck in molasses so far, rely on that budget resolution—enabling them to move on to the reconciliation process—getting through.

The House passed its budget bill earlier this month, and despite a few hiccups, the Senate followed this week. But media reports assuming that this creates a glide path to a tax or health-care showdown are neglecting how dissimilar the House and Senate bills actually are.

The big difference involves the federal budget deficit. The House budget resolution envisions a deficit-neutral tax reform, with savings coming at the expense of spending programs. It purports to balance the budget in ten years, in part through $203 billion in direct spending cuts. While many of the other elements of the House budget bill can be ignored—it assumes the doomed American Health Care Act passes, and separately transforms Medicare into a coupon program for the purchase of private insurance—the $203 billion is in the reconciliation instructions, and therefore mandatory if you want to pass a reconciliation bill.

The Senate reconciliation instructions have no mandated spending cuts. In fact, there’s no specific fiscal target anywhere, save for a requirement of $1 billion in revenue from the Energy and Natural Resources Committee, which everyone presumes would come from opening the Arctic National Wildlife Refuge in Alaska to oil and gas drilling. Plus, the Senate makes room for $1.5 trillion in deficits to come from the Republicans’ proposed tax cuts. That’s probably an absurdly low number given Republican aims. They’re likely to use bogus statistical rationales like “dynamic scoring” to show that economic growth will wipe out revenue losses. But on the other side of the Rotunda, House Republicans don’t want to concede that the cuts will create any deficits at all, and they desperately want to impose those automatic spending cuts.

The dirty secret is that budget-writers in both chambers know about this impasse, and haven’t figured out a fix yet. In addition to the core reconciliation issue, the budgets differ on treatment of Medicare and Medicaid, levels of military spending, and what parts of the budget specifically would contribute to deficit reduction. In other words, virtually everything that moderates and conservatives, military hawks and fiscal scolds, entitlement destroyers and those wary of crossing their base of senior citizens, have been arguing about within the GOP for years has to be worked out in a single bill.

Hardline conservatives in the House see the budget bill as their chance to force spending cuts that have previously been beyond their reach. “If we continue to spend more than what we bring in year after year, it doesn’t matter how much tax reform we do,” Representative Diane Black, chair of the House Budget Committee, told Politico. Some could be willing to throw the spending cuts overboard to tee up tax cuts, but that hasn’t traditionally been the style of Republican hardliners.

President Trump is squarely allied with the Senate on this; he’s obviously bought the line from his new best friend Mitch McConnell that whatever the Senate can pass is the only viable outcome. Trump actually called House Republicans to tell them to just pass the Senate bill outright, skipping the traditional conference committee where differences between the two chambers’ bills can be reconciled.

That didn’t sit well with House conservatives, especially since Speaker Paul Ryan has already indicated that they’ll go to conference. The Senate bill also may restrict what Republicans could do on health care, which conservative groups find intolerable.

At some level, Republicans know that the budget means nothing, except as a vehicle to get to a tax overhaul. But House Freedom Caucus members have not typically abandoned their leverage for the sake of comity. As it is, the House budget resolution, the one with the $203 billion in cuts, only passed with 219 votes, just two more than needed. Nineteen Republicans even found that package not conservative enough. So it wouldn’t take many Republicans flipping to sink the conference bill.

One of the House budget supporters, longtime Ways and Means Committee member Pat Tiberi, abruptly resigned from the House on Thursday to lead a business group in his home state of Ohio. Tiberi didn’t set a resignation date, but said he would be gone by January 31, 2018. What’s interesting is that Tiberi would leave now. Ways and Means is the main tax-writing committee, and Congress doesn’t get an opportunity to radically alter the tax code every year. Why doesn’t Tiberi think it’s worth it to stick around? What does he know?

Whether the budget resolution will be a minor blip or a catastrophe depends on whether you think Republicans will keep their eyes fixed on the goal of tax cuts. Normally that’s a safe bet, but it’s not at all clear House hardliners will adhere to that. They may see spending cuts—or just reaffirming their institutional dominance by getting their way—as more important. We’ve seen enough of this Congress to know better than to expect solid decision-making and functional governance. Observers are discounting this possibility, but it’s entirely likely that no deal gets made, and that everything Republicans worked for in multiple elections could collapse.

UPDATE: The budget bill that passed the Senate last night included an amendment that House GOP leaders claim enables them to avoid a conference committee and put the Senate's version on the floor for a vote, perhaps as soon as next week. But that amendment mainly allows for increased military spending, while rejecting the $203 billion in domestic spending cuts and deficit neutrality in the reconciliation bill. House leaders obviously believe the promise of tax cuts is enough to get hardline members to go along. We'll see how that theory makes contact with reality.

The blank slate that is Beto O’Rourke looks good to a Wall Street vulture capitalist.

About the Author

Incoming (arriving June 1) American Prospect executive editor David Dayen is a contributing writer to Salon.com who also writes for The Intercept, The New Republic, and The Fiscal Times. His first book, Chain of Title, about three ordinary Americans who uncover Wall Street's foreclosure fraud, was released by The New Press on May 17, 2016.